Petty Cash

Note : Students should study carefully from the Spicer and Pegler’s book the system of internal check that should exist in respect of payments made from petty cash.
Payments from petty cash should be verified as follows :

  1.  Trace the amounts advanced to the petty cashier for meeting petty office expenses from the Cash Book in the Petty Cash Book.
  2.  Vouch payments with docket vouchers which must be supported, wherever possible, by external evidence e.g., payee’s receipted bill or invoices, cash memo, etc.
  3.  Trace payments made for the purchase of postage stamps recorded in the Postage Book. The totals of the Postage Book should be test checked. The amounts of postage stamps in hand, at the end of the year, should be credited to Postage Account by debiting the amounts to Postage in Hand Account. It should be seen that the amount paid for postage stamps is not unduly large and the Postage Book is normally checked by the petty cashier from time to time before the amount of imprest is reimbursed. Confirm that the postage expenses for the year is reasonable as compared with that in the postage expenses from month to month.
  4.  See where a columnar Petty Cash Book is maintained, that the extension have been carried forward into appropriate amount columns.
  5. Check the column totals and cross totals.
  6.  Trace posting of the various columns in which payments are classified to the respective ledger accounts.
  7. Verify the cash balance in hand.
  8.  Auditor should also verify whether the amount of petty cash imprest is fixed. Is this amount reasonable considering the total amount of petty cash payments made during a month or so?
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